The Incentive Playbook: How Revenue Leaders Are Continuously Optimizing Sales Compensation

For most organizations, sales compensation plans were historically “set it and forget it” documents. Design the plan at the beginning of the year, get it approved, and implement it through the fiscal year.

But in a revenue environment where markets change quickly, product priorities shift and customer buying patterns evolve, that approach simply doesn’t work anymore.

Revenue leaders are embracing continuous incentive optimization. 

By actively reviewing and iterating on incentive plans throughout the year, they can be sure their programs are driving profitable growth.

Four Questions Revenue Leaders Are Asking About Incentives Every Quarter

Once-a-year incentive planning isn’t agile enough for today’s rapidly changing revenue landscape. To keep up, revenue organizations are conducting quarterly reviews of their plans.

In these reviews, they ask questions like: 

Are incentives driving the right seller behaviors? 

Are salespeople focusing on the products and transactions that leadership wants them to pursue? If not, how can the plan encourage different behaviors?

Do payout distributions reflect performance? 

Are quotas appropriately challenging? Are too many (or too few) people hitting accelerators? Examining the distribution of attainment can help organizations adjust quotas and metrics to maintain appropriate incentives.

Are we paying out too much on discounts?

Consider two sales reps who both bring in $1 million in annual revenue. One closes deals with high margins and little-to-no discounting. The other scales revenue by discounting heavily. 

If both reps earn the same level of incentives, leaders may accidentally incentivize behavior that hurts margins.

Modern compensation plans use margin weighting or even discounting safeguards to prevent this.

Are sellers motivated or already tuning out? 

Mid-year performance data can also help identify when sellers are likely to tune out. If attainment looks impossible, leaders can review whether quotas need to be adjusted (based on market conditions) or if sales territories need to be redesigned.

Sales Compensation Metrics to Review Quarterly 

In addition to the questions above, Revenue Operations teams can also monitor key indicators that inform incentive plan design. Data points to watch include: 

Salesperson attainment distribution 

How many salespeople are meeting goals? Falling short? Selling significantly above quota? 

Percentage of reps earning accelerators 

How often are higher-than-expected payouts earned? If “eating into margin” is a concern, this is a key number to monitor each quarter.

Product velocity 

Which products are closing? Are sales teams moving toward strategic products at the desired velocity?

Discounting trends by territory or seller 

Are certain salespeople discounting more than others? Does that behavior affect incentive payouts? 

Sales Cost Ratio 

What percentage of revenue pays for commissions? Is that ratio increasing as sales grow? 

These are just a few of the metrics Revenue Operations leaders should monitor each quarter. Most capture data from existing compensation systems like SAP Commissions or Xactly Incent.

But the goal should not just to monitor incentive payouts. Leaders should review these numbers to understand what incentive compensation is telling them about seller behavior and revenue trends.

Making Changes? Use Scenario Modeling to Understand Impact 

As you consider adjusting plans to drive new seller behaviors, it’s important to understand how changes will impact overall payout.

That’s where scenario modeling comes in. 

By using historical performance data to model how adjustments to plans may have impacted past results, revenue leaders can estimate the potential impact of their proposed changes.

Scenario modeling allows leaders to understand the payout exposure of increasing accelerator rates. Or determine if lowering plan thresholds may help increase seller motivation (without increasing costs).

Continuously Optimizing Incentives with Adaptive Plans 

Just as organizations are analyzing incentive payouts on a quarterly basis, technology is starting to enable continuous plan optimization.

Revenue leaders are experimenting with plans that include:

1.Quarterly incentive rate adjustments
2.Margin accelerators
3.Predictive attainment “what-if” modeling
4.Behavioral alerts that notify leadership about spikes in discounting

Incentives tied to strategic product adoption 

Adaptive compensation plans tie sales payouts more directly to strategic goals. But they also create a framework where incentives can be adjusted on an ongoing basis to respond to changing business needs.

Takeaways: Sell Like Never Before with Incentive Intelligence 

Sales compensation isn’t just about paying sellers the right amount.

When you tie incentives to strategic business goals and continuously optimize plans, you can change how sellers win in the market.